It's a two-way street; lenders share blame

Norwalk Reflector Staff
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Oct 29, 2015 at 12:01 PM

There’s a lot of responsibility with becoming a homeowner. Two of the biggest are making your monthly mortgage payment and properly maintaining your property — cutting the grass, raking the leaves, etc.

A lot of people seem to be finding this out and they don’t like it.

One group is people who signed up for too-good-to-be-true mortgage terms that they are now finding, not surprisingly, turned out to be too good to be true. You’ve heard about them, now that the introductory period is over, principal has kicked in, variable rates have gone up, etc., making the monthly payment in some cases double what it was just two or three years ago. Probably a majority of those who bought into these schemes are now unable to make their payments and are finding themselves on the short end of foreclosure proceedings.

The other group, the one you don’t hear much about, are the mortgage companies who concocted these schemes and pushed and in some cases mislead naïve and unsuspecting consumers into taking on these unsustainable mortgage commitments.

They are the ones now initiating the foreclosure proceedings. However, some of them have run into a roadblock in the form of Federal Judge Christopher Boyko, who last month dismissed a handful of foreclosure lawsuits. Judge Boyko rightfully sent a message to nefarious lenders that if they intend to throw people out of their homes and take ownership, they are going to have to comply with the law.

In a nutshell, the lenders brought suit before getting all of their paperwork in order to prove that they owned the property. The judge threw out the suits because they couldn’t legally prove they had proper title to their properties.

What has been happening is that the lenders have been creating confusion about who holds mortgages of houses in foreclosure so that they can keep on collecting interest on default judgments while not having to take responsibility for maintaining vacant houses. They rush to have people evicted but then delay recording deeds, leaving municipalities (i.e. taxpayers) to board houses up and keep grass and weeds cut.

That stinks.

Plus, in many of the subprime loans, the loans were pooled and repackaged into junk bonds and hedge funds in order for the lender to drive up profits and escape the financial risk associated with the shaky loan. They got sloppy and it’s likely that many won’t even be able to prove they are entitled to property ownership. That’s too bad for them, but in most cases is no more than they deserve for their predatory practices.

As we said, there’s a lot of responsibility associated with homeownership, but it’s a two-way street of responsibility. Lenders, just like borrowers, who failed to act responsibly, deserve whatever happens to them. We’re glad at least one court is going to hold everyone to the letter of the law and we hope others follow suit.